Key points of investment:
Green Harmonic announced the results announcement for the third quarter of 2023: revenue for the first three quarters of 2023 was about 254 million yuan, a year-on-year decrease of 26.26%; net profit attributable to shareholders of listed companies was about 72.5 million yuan, a year-on-year decrease of 43.36%.
The industry is sluggish, and the performance of the three-quarter report is under pressure
Revenue for the first three quarters of 2023 was about 254 million yuan, down 26.26% year on year; net profit was about 72.5 million yuan, down 43.36% year on year; net profit after deducting non-return net profit of 66.48 million yuan was 66.48 million yuan, down 36.78% year on year.
Among them, the third quarter achieved operating income of 82.44 million yuan, down 18.42% year on year, down 0.71% month on month; net profit attributable to shareholders was 21.85 million yuan, down 39.88% year on year and 15.90% month on month.
The main reason for the decline in the company's performance is the slowdown in downstream demand in the industrial robot industry, increased competition in the industry, and the decline in sales of the company's products. According to data from the National Bureau of Statistics, industrial robot production in July-September 2023 was -13.3%, -18.6%, and -14.3% year-on-year respectively, an increase in decline from the first half of the year.
The growth rate of the industry slowed in the third quarter, and demand for speed reducers was under pressure.
The industry is sluggish, gross margin is declining, and profitability is declining
The company's gross profit margin for the third quarter of 2023 was 41.73%, down 9.44 percentage points from the previous year, and down 0.62 percentage points from 2023H1. The main reason for the decline in gross margin is the decline in prosperity in industries such as 3C, semiconductors, and electronics, etc., the industrial robot industry is sluggish, and competition for speed reducers has intensified.
The company's net profit margin for the third quarter of 2023 was 29.08%, down 8.21 percentage points from the previous year and 0.9 percentage points from 2023H1. The main reason is that gross margin has declined markedly.
The company's weighted ROE for the third quarter of 2023 was 3.69%, down 3.16 percentage points from the previous year.
Leading domestic production of harmonic reducers, benefiting from the medium to long term, the localization promotion company is a high-tech enterprise specializing in R&D, design, production and sales of precision transmission devices. The products include harmonic reducers and precision parts, mechatronic actuators, micro electrohydraulic servo devices, intelligent automation equipment, etc., which are widely used in high-end manufacturing fields such as industrial robots, service robots, CNC machine tools, medical equipment, semiconductor production equipment, and new energy equipment. The company took the lead in achieving industrial production and large-scale application of harmonic reducers in China, breaking the monopoly of international brands in the field of domestic robot harmonic reducers. According to the company's 2022 annual report, the company's domestic harmonic reducer market share reached 24.7% in 2021, second only to industry leader Hamelnak at 35.5%, ranking second in the industry.
The speed reducer is a core component of industrial robots and a major component of the cost. The localization rate of robot speed reducers is still low, and international giants such as Nabotsk and Hammernac still occupy the main market share. In the medium to long term, domestic speed reducers still have a lot of room for domestic replacement. Green Harmonics is a leading domestic harmonic speed reducer company, and is expected to benefit from domestic replacement of the core components of robot speed reducers in the medium to long term.
The company makes full use of the capital market to raise capital and expand production, making full use of technological advantages and scale advantages to seize the market. According to information disclosed in the company's announcement on August 22, 2023, “Response Report on Green Harmonics Issuing Stock Review Center Opinions to Specific Targets (Revised Draft)”, the company's production capacity will increase to 1.79 million units/year (1.59 million speed reducers+200,000 mechatronic integrated products) after delivery, which is 6.63 times the company's production volume of 277 million units of harmonic reducers in 2022 (5.74 times the production capacity of reducers). The rapid expansion of the company's production capacity will help the company adapt to the development of the industry, further expand its market share, and promote the process of localizing robot speed reducers.
Humanoid robots have entered a period of rapid development, opening up space for harmonic reducers, and the Ministry of Industry and Information Technology issued the “Guiding Opinions on the Innovation and Development of Humanoid Robots”, proposing that by 2025, the humanoid robot innovation system will be initially established, and a number of key technologies such as the “brain, cerebellum, and body” will make breakthroughs to ensure the safe and effective supply of core components. By 2027, humanoid robot technology innovation capabilities will be significantly enhanced, a safe and reliable industrial chain supply chain system will be formed, an internationally competitive industrial ecosystem will be built, and its comprehensive strength will reach the world's advanced level.
Humanoid robots integrate advanced technologies such as artificial intelligence, high-end manufacturing, and new materials, and are expected to become disruptive products after computers, smart phones, and new energy vehicles. They will profoundly change human production and lifestyle, reshape the global industrial development pattern, and have huge market space. Harmonic reducers are small in size, light in load and large in transmission ratio. They are widely used in the small arms, wrists, and hands of humanoid robots. Because of their high motion requirements, humanoid robots have a much higher degree of freedom than traditional industrial robots. Take the Tesla Optimus robot as an example. It has a total of 40 degrees of freedom, which is an order of magnitude higher than the 3-6 degrees of freedom of traditional industrial robots, which means that the number of speed reducers used in a single robot will also increase significantly.
Humanoid robots have entered a period of rapid development, bringing more room for growth to the harmonic reducer industry.
Profit forecasting and valuation
The company is a leading domestic harmonic reducer enterprise. In the medium to long term, it has benefited from domestic alternatives to industrial robot reducers. At the same time, it has benefited from humanoid robots entering a period of rapid development. Harmonic speed reducers are used more in humanoid robots, and their value is greater. Humanoid robots have brought more market space to the harmonic reducer industry.
We forecast that the company's operating income from 2023 to 2025 will be 387 million, 541 million, and 782 million, respectively, and net profit from 2023-2025 will be 108 million, 166 million, and 247 million respectively. The corresponding PE will be 222.45X, 144.32X, and 97X respectively. First coverage, giving the company an “increase in holdings” rating.
Risk warning: 1: demand for industrial robots falls short of expectations; 2: humanoid robot market development falls short of expectations; 3: market competition intensifies, gross margin declines; 4: robot transmission execution technology routes have changed.